President Trump's endorsement of suspending federal gas taxes has pushed the idea higher on the political radar, but it still faces long odds. Some Republicans rushed to introduce bills and a few Democrats have already endorsed the idea, yet serious obstacles remain that could keep Trump's comments from becoming reality.
The federal tax sits at 18.3 cents for gasoline and 24.3 cents for diesel, plus an additional .1 cent fee for underground tank leaks. Trump needs Congress to act, and early signals are mixed—GOP lawmakers like Sen. Josh Hawley quickly promised legislation, but Senate Majority Leader John Thune was noncommital.
Thune noted the revenue loss could hurt the Highway Trust Fund and said the best remedy for gas prices is reopening the Strait of Hormuz. Meanwhile, some Democratic lawmakers are offering alternative approaches to control fuel costs, tapping into fundamental disagreements between parties about who should bear the costs of war and inflation.
A bill from Rep. Brad Sherman would tax oil companies on any profits from selling oil above $75 per barrel, imposing a 100% windfall tax on those profits. That revenue would be redistributed to consumers as a tax rebate, staying in effect for the duration of the Iran conflict or until oil drops below $75.
Other Democratic proposals aim to combat both inflation and alleged wartime price gouging. The counterargument: Critics warn that windfall taxes could discourage domestic production and worsen supply constraints, potentially driving prices higher over the long term.